The Journal of Finance

Value versus Glamour

Published: 09/11/2003   |   DOI: 10.1111/1540-6261.00594

Jennifer Conrad, Michael Cooper, Gautam Kaul

The fragility of the CAPM has led to a resurgence of research that frequently uses trading strategies based on sorting procedures to uncover relations between firm characteristics (such as “value” or “glamour”) and equity returns. We examine the propensity of these strategies to generate statistically and economically significant profits due to our familiarity with the data. Under plausible assumptions, data snooping can account for up to 50 percent of the in‐sample relations between firm characteristics and returns uncovered using single (one‐way) sorts. The biases can be much larger if we simultaneously condition returns on two (or more) characteristics.

Corporate Political Contributions and Stock Returns

Published: 03/19/2010   |   DOI: 10.1111/j.1540-6261.2009.01548.x

MICHAEL J. COOPER, HUSEYIN GULEN, ALEXEI V. OVTCHINNIKOV

We develop a new and comprehensive database of firm‐level contributions to U.S. political campaigns from 1979 to 2004. We construct variables that measure the extent of firm support for candidates. We find that these measures are positively and significantly correlated with the cross‐section of future returns. The effect is strongest for firms that support a greater number of candidates that hold office in the same state that the firm is based. In addition, there are stronger effects for firms whose contributions are slanted toward House candidates and Democrats.

Changing Names with Style: Mutual Fund Name Changes and Their Effects on Fund Flows

Published: 11/10/2005   |   DOI: 10.1111/j.1540-6261.2005.00818.x

MICHAEL J. COOPER, HUSEYIN GULEN, P. RAGHAVENDRA RAU

We examine whether mutual funds change their names to take advantage of current hot investment styles, and what effects these name changes have on inflows to the funds, and to the funds' subsequent returns. We find that the year after a fund changes its name to reflect a current hot style, the fund experiences an average cumulative abnormal flow of 28%, with no improvement in performance. The increase in flows is similar across funds whose holdings match the style implied by their new name and those whose holdings do not, suggesting that investors are irrationally influenced by cosmetic effects.

Asset Growth and the Cross‐Section of Stock Returns

Published: 07/19/2008   |   DOI: 10.1111/j.1540-6261.2008.01370.x

MICHAEL J. COOPER, HUSEYIN GULEN, MICHAEL J. SCHILL

We test for firm‐level asset investment effects in returns by examining the cross‐sectional relation between firm asset growth and subsequent stock returns. Asset growth rates are strong predictors of future abnormal returns. Asset growth retains its forecasting ability even on large capitalization stocks. When we compare asset growth rates with the previously documented determinants of the cross‐section of returns (i.e., book‐to‐market ratios, firm capitalization, lagged returns, accruals, and other growth measures), we find that a firm's annual asset growth rate emerges as an economically and statistically significant predictor of the cross‐section of U.S. stock returns.

A Rose.com by Any Other Name

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00408

Michael J. Cooper, Orlin Dimitrov, P. Raghavendra Rau

We document a striking positive stock price reaction to the announcement of corporate name changes to Internet‐related dotcom names. This “dotcom” effect produces cumulative abnormal returns on the order of 74 percent for the 10 days surrounding the announcement day. The effect does not appear to be transitory; there is no evidence of a postannouncement negative drift. The announcement day effect is also similar across all firms, regardless of the firm's level of involvement with the Internet. A mere association with the Internet seems enough to provide a firm with a large and permanent value increase.

Market States and Momentum

Published: 11/27/2005   |   DOI: 10.1111/j.1540-6261.2004.00665.x

Michael J. Cooper, Roberto C. Gutierrez, Allaudeen Hameed

We test overreaction theories of short‐run momentum and long‐run reversal in the cross section of stock returns. Momentum profits depend on the state of the market, as predicted. From 1929 to 1995, the mean monthly momentum profit following positive market returns is 0.93%, whereas the mean profit following negative market returns is −0.37%. The up‐market momentum reverses in the long‐run. Our results are robust to the conditioning information in macroeconomic factors. Moreover, we find that macroeconomic factors are unable to explain momentum profits after simple methodological adjustments to take account of microstructure concerns.